Between 2006 and 2020, the world is expected to reach a peak in oil production where world demand for oil resources will be greater than the world's available oil supplies. Learn about oil and natural gas depletion and what that means for the global economy and our way of life in the United States.

Thursday, December 29, 2005

The End of Oil: Interview with Paul Roberts Part I

MJ.com: Is the price of gasoline, and energy policy in general, more important as an election issue now than in previous years?

PR: We’re going to find that out. Certainly I thought -- and I think a lot of other observers thought, going in six months ago, that Kerry would be able to hammer the Bush administration on gasoline prices, but the fact is that as soon as you raise the issue, you have to present a solution. Kerry knows that presidents are very limited in what they can do. It really requires a long-term policy, and Kerry is in the process of working on it, but he recognizes that it’s complex. As much as Kerry would like to give a bumper-sticker answer, he knows that, really, you need a comprehensive energy policy. The Bush administration -- as much as I happen disagree with the way they approached it -- they did have a comprehensive energy policy. They came in and said: “We’re not going to preserve. We’re not going to waste our time thinking too much about the alternatives. Efficiency is great, but we’re not going to bet the farm on it. What we’re going to do is to increase production -- past administrations have let the country down because they have not emphasized production. We have not been drilling as much as we should; we aren’t building enough refineries and power plants; and we have not been as careful in building up relationships with oil-supplies -- not just the Middle East, but diversifying our relationships. We need people outside the Middle East, so therefore, we’re going to be working with Africa, the Caspian, and Russia.”

MJ.com: How does Iraq figure into this vision?

PR: Iraq is the centerpiece [of it]. It automatically marks you as a leftist-green-Nader-anarchist in Seattle if you say that it’s a war for oil. But the problem is that it’s been left in this very narrow political context. That's to say, if you say it’s a war for oil, that means that you're against Bush, and if you claim that it’s a war to promote democracy, than you’re for Bush. But you have to give it a much wider context and say that: given that the U.S. uses as much as oil as it does and has done nothing to reduce its demand and given that the global economy on which U.S. power depends entirely; given that global economy depends entirely on oil, mostly from Middle East, the U.S. has no choice but to be intimately connected with Middle Eastern policy, and to intervene -- either diplomatically or economically or worse -- if the stability of the region is threatened. And that this has been the case under any administration. The U.S. has not cut its demand, so it must involve itself in the affairs of its suppliers of oil. But it's been allowed to be staged so narrowly focused that as soon as you raise the war-for-oil rhetoric, you are unpatriotic. But the fact is that the issue is much larger than that and always has been.

MJ.com: With the occupation and the insurgency, there have been attacks on oil terminals. You can make the argument that the Iraq war hasn't stabilized the Middle East.

PR: No, I think it has done just the opposite. Right now we have attacks on oil installations in Saudi Arabia, attacks on oil tankers, and oil-loading ports, such that the oil market now assigns what it calls a “war premium” to the price of oil. It’s between $5 and $10 dollars a barrel. So the market thinks that it hasn’t worked. I happen to think that this war premium is overstated. The contention there is that were it not for the instability in the Middle East, the price of oil would be much, much lower. And I think that although it would be somewhat lower, there is a fundamental tightness in the oil market -- it’s not simply driven by politics. The market is aware that we use 80 million barrels of oil everyday and that our maximum production at this point is 82.5 million barrels of oil a day. So it’s two and a half million barrels of margin -- that’s our cushion, what we call our spare capacity. Most of that margin is in the Middle East, particularly in Saudi Arabia and Kuwait. What that means is that if Venezuela -- which produces two and a half million barrels of oil a day -- were to fall into civil unrest, as it did a year and a half ago and let’s say it took off its oil production, which happened -- Venezuela basically shut down its exports a year and half ago. The market simply lost that oil. Saudi Arabia and Kuwait were able to pump up their production and fill that gap before the prices went too high. Now if that happened, that would pretty much tap out all the spare capacity we’ve been talking about. There would no more room for accidents. There would be no more room for disruptions. What if production in Iraq fell because the chaos continued to grow and oil companies stopped wanting to send their people there? What if Saudi Arabia has some sort of political upheaval?

3 Comments:

I couldn't agree more about Bush's handling of our nations energy plan. I just blogged about how China will continue to compete with the U.S. for energy resources. You can read it athttp://mymountain.blogspot.com/2006/01/giant-slurping-sound-that-bush-cant.html

Loved the blog posting Scott...here's an article I referenced in a previous post. I love how China's report sounds "nice" but kind of has threatening undertones...

China Eyes More Energy Cooperations With US

BEIJING - China and the United States should increase co-operation on energy issues ranging from crude oil production overseas to civilian nuclear programs, China's top economic planning body said in a statement on its Web site. Co-operation should be deeper and more efficient, with priority placed on promoting stability in producing nations and secure oil shipping lanes, the National Development and Reform Commission said. The world economy would benefit if China has secure energy supplies, but U.S. concerns about the rise of China's fast-growing economy could lead to restrictive legislation, the commission added.

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